Beverage giant challenges decision of State Audit Office that it must pay tax arrears for 2013.

Local brewer Sabeco disputes hefty bill for tax arrears

It is reported recently on the State Audit Office (SAO) submitting a proposal to the Ministry of Finance (MoF) on the collection of VND408 billion ($18.7 million) in special consumption tax arrears for 2013 from the Saigon Beer Alcohol Beverage Joint Stock Corporation (Sabeco).

The matter attracted a lot of public attention as Sabeco is a major player in Vietnam’s beverage industry and revelations of unpaid taxes may damage its reputation.

On July 10 the SAO held a press conference to confirm that the proposal on collecting the tax arrears was undertaken within the taxation law.

Ms. Truong Thi Viet Huong, Head of Regional State Audit Office No.4 (Ho Chi Minh City) said that special consumption tax is levied on the manufacturing process.

To reduce its tax obligations, Sabeco sold its products to its trading subsidiaries at a lower price, with them then being distributed to other distributors and wholesalers at a higher price.

She stressed that Sabeco’s revenue is calculated on what they collect from distributors and wholesalers, so the decision requesting Sabeco pay tax arrears in correct.

A few days later, on July 15, the Vietnam Beer Alcohol Beverage Association (VBA) held a conference on the SAO decision, where it was claimed it was, in fact, wrong.

The conference was attended by many representatives from interested parties, including from Sabeco and the Hanoi Beer Alcohol and Beverage Joint Stock Corporation (Habeco), a lawyer, a member of the National Assembly, the Ministry of Industry and Trade (MoIT), the Director of Central Institute for Economic Management (CIEM), and the Vietnam Association of Accountants and Auditors (VAA), all of whom voiced their support for Sabeco’s position.

A representative from SAO was invited but did not attend.

In answering questions from reporters about what would happen if MoF approved the SAO proposal to collect tax arrears from Sabeco, Chairman Phan Dang Tuat confided he didn’t really know because it would be a complicated process given that Sabeco is almost 90 per cent State-owned.

If Sabeco was directed to pay the tax arrears it would firstly send documents to the Ministry of Industry and Trade (MoIT), then MoIT would propose the MoF access budget funds to give to Sabeco, with Sabeco then paying the arrears to the SAO.

Finally, the money would be returned to MoF as manager of State budget funds. Additionally, as the tax arrears are for 2013, it would affect the company financial statements, Mr. Tuat emphasized.

Mr. Tuan previously told VET that the major part of its revenue is returned to the State budget, so Sabeco had no reason to evade its tax obligations. After paying excise tax, Sabeco then pays revenue tax to the State budget and then share dividends, most of which also go to the State budget.

According to Mr. Phan Chi Dung, General Director of the Light Industry Department at MoIT, the SAO’s decision has concerned and confused Sabeco and other companies.

The company created a distribution network in order to distribute its products, which is normal practice.

When Sabeco created its network its sought approval from MoF. “How Sabeco and others calculate their taxes does not violate existing regulations,” he said.

“It should not be the case that companies apply existing regulations but are told by a State agency that they are using a loophole and must pay tax arrears.”

Mr. Nguyen Dinh Cung, Director of CIEM, said that if Sabeco violated the law then the SAO needs to identify exactly what laws have been violated. A company taking advantage of a legal loophole is not violating the law, he said.